Long Term Perspective
Gold is a special metal. It has long been considered a hedge against inflation even though it has not kept up with inflation for several years. Gold is also considered a hedge in times of uncertainty such as war, economic and financial turmoil. Central banks have held gold in reserve, but between 1999 and 2003, several central banks including the Bank of England and the Swiss National Bank either sold gold reserves, or announced their intention to do so. Despite all its attributes, many Fed officials still consider this an indicator of inflationary pressures.

Short Term Perspective
Gold prices have been trending higher over the past couple of months. To a large extent, gold prices have been trading up and down with oil prices recently. Also, the foreign exchange value of the dollar has declined in the past month, and this too has boosted gold prices. Usually, a depreciating dollar is inflationary for U.S. consumers because foreign goods are more expensive. In this competitive environment, it will be interesting to see whether prices of foreign goods actually do rise.

Alternative Inflation Measures   •   Gold Prices   •   Employment Cost Index   •   Civilian Unemployment Rate

Pool of Available Labor   •   Nonfarm Productivity   •   Treasury Yields   •   Stock Prices   •   Fed Monetary Policy Summary